Despite acknowledging that exports have declined the steepest since 2010, the Reserve Bank of India’s (RBI) move to maintain status quo on interest rates, has irked the premier engineering export body EEPC, which said that RBI’s decision to keep interest rate high was “ironical”.

“It is ironical that RBI recognises that India’s exports have seen the steepest decline since the second quarter of 2009-10. Still it has chosen to persist with high interest rates. High cost of borrowing, coupled with increasing number of loans turning into NPAs, have pushed the manufacturer-exporters in a kind of vicious circle,” EEPC India Chairman Anupam Shah said. 

“When exports need a special dispensation, no relief has been given to them. It is time the government intervened to announce some important measures to mitigate exporters’ pain. Or else the exports would fall far short of even $300 billion in the current fiscal, against $310 billion in 2014-15,” he said.

The RBI in its third bi-monthly policy said that shrinking exports in a few industries, in part a result of weak global demand and global overcapacity in those industries, and in part a result of the significant depreciation of currencies of some trading partners against the rupee, also contributed to weak aggregate demand.

Headwinds from weak global demand conditions restrained merchandise exports. The contraction in exports in Q1 of 2015-16, both volume and value, was the steepest since Q2 of 2009-10, the central bank said. India Inc too expressed disappointment at the RBI’s move to maintain status quo ante on the policy rates.

Industry body CII said that credit demand was weak and banks were grappeling with stressed assets. “A cut in interest rate in such a situation would have done much to restore the investment cycle,” CII Director General Chandrajit Banerjee said.

“The decision of RBI to keep the policy rate unchanged is disappointing for the industry. Given that the industrial growth still remains volatile and demand conditions have not seen much improvement, there is a need to give policy stimuli to encourage demand and investments,” Banerjee said.

India Inc would like RBI to take advantage of the cheap commodity prices and go in for some bold moves on the interest rate front — that would have helped both ways — in reviving the consumer demand and deleveraging the balance sheets, Assocham said.